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Tuesday, November 3, 2015

Daniel Hannan: Small Is Beautiful

What are the two richest countries in Europe? According to the
Legatum Institute, which publishes an annual prosperity league,
Switzerland noses ahead of Norway. Money isn’t everything, of course.
The United Nations runs a quality of life index, which also takes
account of literacy, longevity, infant mortality and the like. It
reaches the same conclusion: Switzerland and Norway are the best places
on Earth to be born.

There has been a great deal of focus on these two chilly, mountainous
lands recently. Because they are flourishing outside the European
Union, Euroskeptics point to them as examples of how it pays to be a
sovereign nation. Supporters of the EU, by contrast, are keen to rubbish
their arrangements with Brussels, portraying them as oxpecker birds
clinging to the mighty EU hippopotamus, voiceless passengers downloading
Brussels laws over whose framing they have no say.

Last week, the British prime minister, David Cameron, effectively
launched his campaign to stay in the EU by dismissing what he called a
“Norway-style relationship.” Yet the Norwegians themselves plainly
prefer their deal to full membership. Opinion polls there show settled
majorities of three to one against joining the EU. It’s a similar story
in Switzerland, which, like Norway, voted against closer ties with the
EU in a referendum the early 1990s. As members of the European Free
Trade Association, both countries get to participate fully in the EU
market without having to join the political structures. True, they have
no direct say over the shaping of the EU’s laws; but then, those laws
generally don’t affect them.

Perhaps the oxpecker birds are getting the better end of the deal.
Perhaps, in the modern economy, it’s better to be small and agile. After
all, the countries with the highest GDP per capita tend to be very
small: Switzerland, the United Arab Emirates, Brunei, Monaco, the
Channel Islands. It won’t do to dismiss them as tax havens, either. How
did they become tax havens? By having low taxes. Why are their taxes
low? Precisely because they are small, and so avoid the duplication, the
bureaucracy and the producer-capture that large states are prone to.

The only large country to get into the top twenty is the United
States, which has pulled off the trick of governing itself like a
confederation of statelets. The fifty states now have more sovereignty,
in many ways, than entire nations within the EU. Georgia can decide
whether or not to apply the death penalty, but Germany can’t. Delaware
can set its own rate of sales tax, but Denmark can’t.

It’s true that the United States has become more centralized over the
years: A process that arguably began during the Civil War, but that
only properly got going under FDR. But it is starting from a better
place than almost anywhere else. The Founders wanted power to be
dispersed, divided and democratized, and drew up their Constitution
accordingly. They were not starting, as many European countries were,
from absolutist monarchy. Nor did they begin, as so many former colonies
did after World War Two, with a belief in beneficent government.
Indeed, of all the states on Earth, only happy, prosperous Switzerland
has a more devolved form of administration.

And yet, despite all the evidence, we cling to the big-is-beautiful
myth. “We need to band together to face China and Indonesia and the
other rising powers!” say EU supporters. Really? If size were the key to
success, China would be wealthier than Hong Kong, and Indonesia would
be wealthier than Singapore — and the EU itself, for that matter, would
be wealthier than Switzerland.

Here’s the paradox. The reason Europe emerged as the dominant
civilization of the past five centuries was precisely that it never
became a single state. In 1500 AD, the scattered peoples at the western
tip of the Eurasian landmass would have seemed unlikely contenders for
global hegemony. The smart money would have been on the great Asian
empires: Ming China, Mogul India, Ottoman Turkey. With their canals and
their paper money, their gunpowder and their telescopes, their
cartography and their mathematics, these states were far in advance of
Europe.

So why didn’t the Chinese round Africa to discover Portugal? Why was
it the other way around? Precisely because Europe remained a diverse
plurality of competing states.

How tragic that, just as the great civilizations of Asia are waking
up to the benefits of decentralization, Europe should be determinedly
going down the Ming-Mogul-Ottoman path to uniformity, bureaucracy and
regulation. This won’t end well.

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